a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:## Horizontal Analysis of the Income Statement
**Income statement data for Winthrop Company for two recent years ended December 31 are as follows:**
| | Current Year | Previous Year |
|--------------------------|--------------|--------------------|
| Sales | $2,280,000 | $2,000,000 |
| Cost of merchandise sold | $1,960,000 | $1,750,000 |
| Gross profit | $320,000 | $250,000 |
| Selling expenses | $156,500 | $125,000 |
| Administrative expenses | $122,000 | $100,000 |
| Total operating expenses | $278,500 | $225,000 |
| Income before income tax | $41,500 | $25,000 |
| Income tax expenses | $16,600 | $10,000 |
| Net income | $24,900 | $15,000 |
**Tasks:**
a. **Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.**
### Winthrop Company
**Comparative Income Statement for the Years Ended December 31**
| | Current Year Amount | Previous Year Amount | Increase (Decrease) Amount | Increase (Decrease) Percent |
|--------------------------------------|---------------------|----------------------|---------------------------|-----------------------------|
| Sales | $2,280,000 | $2,000,000 | | |
| Cost of merchandise sold | $1,960,000 | $1,750,000 | | |
| Gross profit | $320,000 | $250,000 | | |
| Selling expenses | $156,500 | $125,000 | | |
| Administrative expenses | $122,000 | $100,000 | | |
| Total operating expenses | $278,500 | $225,000 | | |
| Income before income tax expense | $41,500 | $25,000 | | |
| Income tax expense | $16,600 | $10,000 | | |
| Net income
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